A look on NITI Aayog through Economic Prism

Sheela Kharkwal

Viewing through economic perspective will mean what NITI Aayog really means for fiscal
federalism, resource transfer and for centrally sponsored schemes.

According to Jewes Stiglas ‘The issue is not that the planning is needed, it surely is, but whether
the most effective place to do the planning is in the government centralized bureau, or at the
level of the firm’.

Today most of the economists are skeptical about the ability of centralized bureau to do effective
planning. Economy has been moved away from the time of the second rigid plan of Mahalnobis
type, planning process itself undergoing a lot of changes. State is not the dominant partner in
economic programs anymore therefore the kind of planning which we did earlier is not consistent
with our contemporary times. Even when the 8th plan was being written during 1992-97, our
economy moved away from this centralized planning. As far as the role of private sectors is
concerned, it will continue to increase therefore we need to move to the indicative type of
planning.

This will be a basis for new liberalization policy and it doesn’t mean government will not have
any role; rather it will better look upon macro issues which arise at the growth process, as fixing
targets for every sector is no more feasible.

Late Dr. Amrish Bagchi, also argued that in a market driven economy planning must be
indicative, prescriptive and must try to co attempt coordination between the states.

With the erstwhile planning commission, the biggest drawback from the point of fiscal
federalism as far as states were concerned is that instead of having an experience of being
partners, states felt that they were at the receiving end with a begging bowl. Thus planning
commission followed a top- down approach and reduced space for fiscal federalism. NITI aayog
on the contrast will have bottom-up approach and is expected to be in sync with what states feel
is necessary.
If we go through the notification of government, it is completely silent on the part of resource
allocation, if NITI Aayog do not have this role, it may make it a toothless body. While on
resource allocation Dr. C. Rangrajan argues that 60% of the transfer takes place trough finance
commission, transfer through Planning Commission is limited only to 2-3%. As planning
commission has a very small role in resource allocation, this additional responsibility can be
easily shifted to finance commission.

Mrs. Sudha pillai say Allocation for each ministry, each department can be worked by respective
ministry along with finance commission.

According to Mr. Sompal Singh (previous Agricultural minister) Planning commission was
always given the responsibility of allocating residue left after finance ministry.

Since Finance commission is not a permanent body, neither does it have any representation from
states, it may question the idea of cooperative federalism here. Finance Commission is a
constitutional set up therefore has some defined roles and structure. Though government can
ensure proper representation of states in finance commission; composition can be decided by
government, yet to incorporate these changes, constitution will need to be amended.

During second five year plan, planned and non planned expenditure ratio was fifty- fifty percent.
At present planned expenditure is only 25 per cent, of which 75 per cent goes as Revenue
expenditure like in salary, maintenance and only 25 per cent remains for investment purpose.

At present the distinction between planned and non-planned expenditure has been blurred. Panel
headed by Dr. C. Rangrajan in 2011 reported that distortions have crept in by this illogical
distinction and is coming in a way of efficient expenditure. Does the setting up of NITI Aayog
change the entire way with which things were being done in the past, remains a doubt?

Next question that arises is now who will decide special category status to states. Special
category states enjoy some privileges. One answer may be NITI Aayog and finance commission
can jointly look into this matter, there should be no bar in joint working of both the commission.
Straight jacketing through centrally sponsored schemes (CSS) has always been a big issue
because conditions, problems and matters varied state wise and even with the neighboring states,
these schemes have essentially been designed by planning commission. One of the reasons of
disaffection of states to these CSS is that states do not get funds in untied form and which limits
them to use these resources properly wherever needed. True fiscal federalism will be possible
only when these schemes are reviewed under NITI Aayog and states will be given with greater
flexibility.

References:

Mythili Bhusnurmath (2015) Macros with Mythili-NITI Aayog Replaces Planning Commission,
ETNOW-January 17

Aarfa Khanam Sherwani (2015) Desh Deshantar-NITI Aayog-How will it be different from
Planning Commision, RSTV- January 2.

Tina and Padmaza (2015) The newshour debate (2015) Rejig or repackaging? TIMESNOW-
January 2

Kurban Ali (2015) Desh Deshantar- NITI Aayog its challanges and outlook, RSTV- January 13